From earlier: Trump threatens a 25% tariff on Mexico and Canada
And so it begins. The random Trump tweets sending waves across markets. The first victims are the Canadian dollar and Mexican peso. The former tumbled on the headline, with USD/CAD racing to its highest levels since 2020 as it briefly breached 1.4100. The high touched 1.4177 before coming back down.
The figure level is a big, big one to watch at the moment. It halted the climb earlier this month and while somewhat breached earlier, the score is yet to be settled on the daily close. And not just that, the monthly close also highlights the importance of the 1.4100 mark.
As seen above, the monthly closes in January 2016 and during the height of the panic from the Covid pandemic all fell short of holding above 1.4100. That despite both occasions even seeing price break above 1.4600 during those months. So, the monthly close will be one of relative importance. That before shifting the focus to the twin peaks in January 2016 and March 2020.
But for buyers, they will want to take a win where they can get on the technical front. The fundamental side of things seems sorted at least.
With the Bank of Canada set to keep with a quicker pace in cutting rates, there is a potential divergence especially with Trump tariffs posing a threat to the inflation outlook in the US. At the same time, it is also going to weigh on the Canadian economy. So, it's a double whammy.
Oh, how one election result changes things eh?
And this is just the start with Trump yet to officially take office. It's going to be a fun 4 years. 🤪
